Compensating Differentials and the Value of Job Security: Evidence from the Egyptian Public Sector

This paper considers the determinants of male and female pay in the public and private sectors by estimating a joint model of sector allocation and wage determination using cross-sectional data from the Egyptian 1987 and 1997 labour force surveys. A model of compensating wage differentials is defined and estimated, in order to quantify the value of arguably the three most important non-pecuniary aspects of public sector employment: job security, fringe benefits (especially comprehensive retirement pensions) and lower effort and shorter hours which allow workers to supplement income through obtaining a second job. Estimates of the public-private differentials, correcting for differences in characteristics and selectivity, indicate a public sector disadvantage for males and a small advantage for females in 1987. Relative public sector wages improved for both males and females in 1997, and when adjustments for non-wage benefits are included, public sector premia are observed in all segments of the public sector for both males and females. The results highlight the importance of job security as the major factor determining the persistence of queues for public sector jobs in Egypt.